The Agents Perspective Fbe breakfast 26-02-2015

Ben Roberts Partner

Cushman & Wakefield

The Agent’s Perspective

Guest Speakers

North West Branch Networking Breakfast Thursday 26 February 2015 7:30am

Radisson Blu Edwardian Hotel, Peter Street, Manchester

Will Lewis Director

OBI Property

Simon Binns Heart of Manchester BID Manager

CityCo

GREATER MANCHESTER

INVESTMENT MARKET

FEBRUARY 2015

Ben Roberts

Head of Cushman & Wakefield Manchester Office

GREATER MANCHESTER

INVESTMENT MARKET

27 CUSHMAN & WAKEFIELD

THE GREATER MANCHESTER INVESTMENT MARKET

Ben Roberts

AGENDA

• The current UK economic situation

• The UK commercial property market

• Manchester City Centre office investment market

• The Greater Manchester industrial market

• The Greater Manchester retail market

• Market predictions

BEN ROBERTS

Head of Cushman & Wakefield Manchester Office

Partner in Capital Markets Team

Buying and selling commercial investment properties throughout the North of England

GREATER MANCHESTER

INVESTMENT MARKET


THE MACRO ECONOMIC SITUATION

• Europe’s fastest growing economy

• 2014 was the best year for the economy since 2007

• A service sector led recovery

• A construction sector which is accelerating despite a small blip in Q4 2014

• Inflation at its lowest rate for 20 years

• Unemployment still falling

• Long awaited Real Wage Growth

“The Feel Good Factor”

GREATER MANCHESTER

INVESTMENT MARKET


UK INVESTMENT VOLUMES

Investment by sector

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

UK

Inv

estm

ent,

£m

illi

on

Office Unit Shop Shopping Centre Retail Warehouse Industrial Leisure Other

Source: Property Data

GREATER MANCHESTER

INVESTMENT MARKET


0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

2006 2007 2008 2009 2010 2011 2012 2013 2014

Retail Prime Initial Yields (RHS) Industrial Prime Initial Yield Office Prime Initial Yield GB 10Year+

REAL ESTATE / BOND RELATIONSHIP

Manchester Prime Yields by Sector Vs. 10 Year Government Bonds

Source: IPD Quarterly Index Q4 2014 / Oxford Economics

Retail – 290 bps

Industrial – 340 bps

Office – 315 bps

GREATER MANCHESTER

INVESTMENT MARKET


MANCHESTER CITY CENTRE INVESTMENT MARKET

The Review – Office Investment 2014

RBS BUILDINGS, SPINNINGFIELDS

£318,390,000 reflecting 4.8% NIY

CITY TOWER, PICCADILLY PLACE,

MANCHESTER

£132,000,000 reflecting 6.75% NIY

0

100

200

300

400

500

600

700

800

900

2007 2008 2009 2010 2011 2012 2013 2014

OFFICE INVESTMENT

GREATER MANCHESTER

INVESTMENT MARKET


1. 186 Deansgate

2. Churchgate & Lee House

3. Arkwright House

4. City Tower

5. St James House

6. Direct Line House

7. St Georges House

8. RBS Buildings

9. Elliot House

10. Free Trade Exchange

11. 1 Piccadilly Gardens

12. Chancery Place

13. Ship Canal House

14. 52 Princess Street

15. Merchant Exchange

16. Peter House

17. 4 Hardman Square

OFFICES

1

3

5

6

7

10

11 12

15

16

17

9

4

8

8

13

14

SPINNINGFIELDS

PICCADILLY


Key Deals – Offices 2014

TRADITIONAL PRIME CORE

2

GREATER MANCHESTER

INVESTMENT MARKET



The Purchasers in Manchester Office Market in 2014

0% 5%

82%

8% 5%

2014 DEALS

24%

8%

12%

15%

41%

2007 DEALS

£862 million – 20 Deals £719.3 million – 26 Deals

1%

5%

77%

14%

3%

2014 DEALS

Bank Irish Propco UK Propco UK Institution Overseas Private Opportunity Fund

GREATER MANCHESTER

INVESTMENT MARKET


Why is Manchester City Centre the Dominant Regional UK Office market?


• Annual take up

• External companies setting up City Centre offices

• Diversity of occupiers

• Number of institutional Grade A opportunities

• Connectivity

• Diverse demographic

• Largest university campus in Europe

• Strength and the continuity of civic leadership

GREATER MANCHESTER

INVESTMENT MARKET


The Review – Industrial Investment 2014

£ m

illi

on

GREATER MANCHESTER INDUSTRIAL INVESTMENT MARKET

PREMIER PARK, TRAFFORD

PARK


OMEGA SOUTH, WARRINGTON

£47,500,000 reflecting 7.5%

0

100

200

300

400

500

600

700

800

900

2007 2008 2009 2010 2011 2012 2013 2014

INDUSTRIAL INVESTMENT

Greater Manchester Warrington

GREATER MANCHESTER

INVESTMENT MARKET


The Investors – Industrial Deals


4%

32%

58%

[PERCENTAGE]

2014 DEALS

Private UK Proco UK Institution Overseas

20%

40%

40%

2007 DEALS

£270 million – 32 Deals £225.5 million – 22 Deals

GREATER MANCHESTER

INVESTMENT MARKET



Return To Speculative funding

GRADE A SUPPLY

0

SPECULATIVE

DEVELOPMENT

GREATER MANCHESTER

INVESTMENT MARKET


The Review – Retail Investment 2014

GREATER MANCHESTER RETAIL INVESTMENT MARKET

0

100

200

300

400

500

600

700

800

900

2007 2008 2009 2010 2011 2012 2013 2014

RETAIL INVESTMENT

Greater Mancester

£ m

illi

on

1 KING STREET


THE ROYAL EXCHANGE


GREATER MANCHESTER

INVESTMENT MARKET


RETAIL

1. 1 King Street

2. The Royal Exchange

3. 19-31 Piccadilly Place

4. The Avenue, 3 & 4 Hardman

Square,

and Left Bank

5. 86-88 Market Street

4

PICCADILLY

3

MANCHESTER CITY CENTRE RETAIL INVESTMENT MARKET

Key Deals – Retail 2014

4

4

4

SPINNINGFIELDS

2

1

RETAIL QUARTER

5

GREATER MANCHESTER

INVESTMENT MARKET


GREATER MANCHESTER RETAIL INVESTMENT MARKET

The Investors - Retail Deals

£360 million – 22 Deals £510 million – 28 Deals

0% 8%

51%

24%

9%

8%

2007 DEALS

1%

5%

77%

14%

3%

2014 DEALS

Bank Irish Propco UK Propco UK Institution Overseas Private Opportunity Fund

GREATER MANCHESTER

INVESTMENT MARKET


WHERE’S THE VALUE IN THE MARKET?

• Secondary buildings in prime locations in need of refurbishment

• Multi-let industrial estates and industrial “break up” opportunities

• Well located sites around larger conurbations

• Good secondary well configured retail units in larger centres

• Office to residential conversion opportunities in city centres

GREATER MANCHESTER

INVESTMENT MARKET


PREDICTIONS FOR 2015

• Rental levels across all 3 commercial sectors are likely to rise

• Development funding will increase

• Foreign Capital investing in the UK to be similar level to 2014

• Benign macro-economic conditions

• Difficulty of finding stock

• Legacy portfolios continue to unravel

• Yields to harden and then level out

Overview

• Covers Manchester’s retail core

• 380 members – fashion retail, food & beverage,

financial services

• RV of £50,000 or above

• Levy of 1% of retailer’s business rates; capped at

£25,000

• Annual budget of £1m; five-year term

Remit

• Launching major new events in the city centre to

attract footfall

• Launching a city centre hosting scheme to improve

the customer experience

• Developing a stream of activity to boost midweek

and evening trade

• Delivering promotional campaigns and partnerships

to attract more affluent shoppers.

Setting up the BID

• Determine a timeline from consultation to ballot –

HoM was 18 months in the making.

• Highlight each key legal and government process,

shadow board meetings, business plan deadlines.

• Determine boundaries, number of levy payers,

estimated income.

• Engagement with key local businesses is crucial at

this stage, to ensure that the plans are endorsed by

the business community.

Manchester’s retail performance

• Second best performer in UK – worth £910m a year

• ‘Heritage’ brands that act as tourism magnets

• Increased tax free offering

• High spend international customers

• 75% of visitors to city come here to shop

Manchester’s retail performance

• Broad appeal – Selfridges to Primark

• Increased sales in menswear, footwear

• Rejuvenation of King Street

• Shrinking vacancy rate

• Manchester Arndale welcomed 41.5m customers in

2014

• Footfall performing well v national average, despite

challenges in sector

Who’s spending?

• International visitors

• Students

• DINKY’s

• Local audience

First Two Years - Highlights

• Giving retailers a stronger platform/voice in the city

• Introducing new events to the city centre (Dig the

City, Vogue)

• Expanding existing events for benefit of retailers

(students, Chinese New Year)

• Engaging more businesses in the city


• Press and PR coverage for the city centre worth

more than £3m so far

• Work to reinvigorate King Street

• Delivering events that increased sales and footfall

for retailers


• City Hosts:

1. Adding to the visitor welcome experience

2. More than 50,000 welcomes in first year

3. Capturing visitor data

4. Regular business visits to maintain relationship

with retailers

Retail trends

• Retailer expectation

• Pop up culture

• Loyalty – and brands are crucial to that

• Explosion of food and beverage sector

• Importance of events, cultural offer, sport, etc

• Shift away from out of town shopping

Next Steps

• Develop existing events programme to become self

sustaining

• Launch retail awards for members

• Promote Manchester as a desirable retail

destination via Marketing Manchester

• Work with property owners, agents and retail targets

Next Steps

• Benchmarking against other BIDs

• Continue to represent retail at a citywide level

• Be ‘the voice of retail’ in Manchester

• Go for a second term..!

Simon Binns

BID Manager

0161 838 3260

[email protected]

Ben Roberts Partner

Cushman & Wakefield

Q & A

Will Lewis Director

OBI Property

Simon Binns Heart of Manchester BID Manager

CityCo

Guest Speakers

Business

The Agents Perspective Fbe breakfast 26-02-2015